Saturday, September 13, 2008

One area of the market investors can find dividend paying stock opportunities is in the midcap value universe. Standard & Poor's notes:

"As a whole, the Standard & Poor’s MidCap 400 index boasts a dividend yield of 1.5%. But when the index is divided into growth and value stocks, the value stocks’ average yield is 2.7%, higher than the yield on growth stocks (0.8%)."

Often times this area is overlooked due to concerns about the increased volatility of this space versus large cap stocks. However, if one looks at the return relative to the volatility, midcap value stocks come out on top from a risk return standpoint. As the two tables below show, midcap value stocks actually exhibit lower volatility than a number of the other asset classes. At the same time, the historical returns are the highest except for small cap value stocks. The second table then details the return divided by the risk, resulting in the midcap value universe generating the highest return per unit of risk.

(click on tables for larger image)

Standard & Poor's publishes a list of Global Challengers that consist of domestic and international midcap stocks. The stocks on the list generally have a market capitalization from $1 billion to $5 billion. The global challengers list (PDF) details 300 companies from 33 countries across nine economic sectors. The list is generated based on the following attributes.

share price appreciation

sales growth

earnings growth

employee growth

The one factor not used in constructing the list is a dividend attribute. However, investors doing their own research can review the dividend characteristics on their own. Sam Stoval of S&P noted in June.

"Mid-cap stocks have less exposure to subprime mortgages, and many of them are initiating or adding to dividends—even as some large-cap stocks cut their dividend payments."

Horan's Other Blogs

Wikinvest

The content of this site is for informational purposes only. The information and content should not be construed as a recommendation to invest or trade in any type of security. Neither the information, nor any opinion expressed, constitutes a solicitation to the purchase or the sale of any security or investment of any kind. The Blog of HORAN Capital Advisors and HORAN Capital Advisors (HCA) disclaim responsibility for updating information on this site. In addition, The Blog of HORAN Capital Advisors and HCA disclaim any responsibility for third-party content, including information accessed through hyperlinks. All individuals are advised to conduct their own independent research before making any investment decision.